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What’s the difference between and which one is right for you?

LifeSearch author Katie Crook-Davies
5 min read

by Katie Crook-Davies, Protection Writer

See author bio

Katie works with insurers and distributors to make protection propositions more accessible, pricing more transparent and marketing messages more simple.See author bio

Guide last reviewed 10 Oct 2023

Your mortgage is likely to be one of - if not the - biggest financial commitment you’ll ever make. You may have saved up for years to get on the housing ladder and now you have, you’ll want to protect that all-important mortgage! Sure, mortgages aren’t particularly exciting but having your own home is, so some kind of relevant insurance should be up there on your list of priorities.

A great reason for taking out life insurance is to ensure that loved ones you leave behind can pay off the mortgage on a family home. There are 13.15 million mortgages in the UK [1] and the average mortgage debt amounts to £127,420 [1]. That’s not the kind of sum your family wants to be faced with paying when you’re no longer around.

That’s why there are specific mortgage related insurance policies out there designed to handle this debt when you pass away - such as mortgage protection insurance. But with life insurance out there too, which should you go for and how do they differ?

Let’s start with life insurance

Life insurance is designed to pay out a lump sum of money to your beneficiaries when you pass away. It’s there as a safety net to keep life ticking along as much as possible without you around, providing for your family and paying the mortgage, any debts - whatever it may be. 

You can take out a life insurance policy at any time in your life, although it’s generally cheaper whilst you’re young and low risk. You can either buy cover that lasts until you pass away - called whole of life cover - or opt for fixed term cover that lasts as long as you choose. It’s sensible to choose term cover that lasts until your mortgage is paid off, or until your children are old enough to be financially independent and the financial pressure lifts a little.

When taking out life insurance, you can also opt for a decreasing term policy or a level term policy. Decreasing term policies are designed to cover a debt that decreases over time, such as a repayment mortgage. Because the potential payout amount decreases over time, monthly premiums are typically lower for the life of the policy. The final payout might not be big enough to cover many costs but it will be enough to pay the mortgage off.

A life insurance policy isn’t designed to solely cover a mortgage however. It’s there to ensure that your loved ones can continue living the life they love in some realm of reality when you’re no longer around. If you have dependents who rely on your income for things such as cars or school, or university fees, then perhaps a life insurance policy geared to cover more than your mortgage would be more suitable for you.

What is mortgage protection?

Whilst there are a number of different insurance products designed to cover your mortgage, the overarching principle remains the same. At LifeSearch, we offer mortgage protection insurance - also sometimes referred to as mortgage life insurance. It protects your mortgage by covering the cost should something happen to the homeowner or homeowners, if you live with a partner. 

Typically taken out at the same time as your mortgage, mortgage protection lasts the length of your mortgage, with the intention of unburdening your loved ones of mortgage payments in the event of your passing. No one wants to leave their family behind in life, but if you do, it’s a huge comfort to know that they’ll be able to cope financially without you. 

When taking out a mortgage protection policy, based on your needs, you will probably need to choose between level term or decreasing term as you would with a life insurance policy. Again, level term gives you the same amount of cover and the same payout throughout the entire duration of the policy and decreasing term decreases as the amount left on your mortgage does.

So, what are the main differences between life insurance and mortgage protection?

As we’ve covered, the biggest difference is the purposes that they are designed to cover. Life insurance can be used for anything your loved ones need, and the latter is designed to cover just your mortgage - although there’s nothing stopping your beneficiaries using it for something else. If a mortgage is your only big financial commitment but your partner still relies on your income to pay it, mortgage protection might be a better fit for you than a catch-all kind of life insurance.

The other big difference is the price in premiums. As with almost any insurance product, premium prices differ from person to person and mortgage to mortgage, based on varying factors. This could be things like your age, health, medical history and lifestyle (such as whether you are a smoker and how much alcohol you drink), and the size of your mortgage. However, mortgage protection tends to be cheaper than life insurance as it’s a decreasing risk - the more you pay off over time, the less your pay out will need to be.



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You can choose 'decreasing term' in our self-service option, to get mortgage protection quotes from top UK insurers, and buy now online.

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LifeSearch author Katie Crook-Davies
Katie Crook-Davies Protection Writer
Katie is an independent insurance consultant who is passionate about protection and wants to share that passion with others through engaging marketing content. She hopes that one day people will get as excited about protecting themselves and their loved ones, as she does!
See all articles by Katie Crook-Davies
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